Equity products, such as stock, are typically traded on exchanges, such as the New York Stock Exchange. Such exchanges provide a centralized source for trading data regarding the stocks traded on the exchange, including liquidity. Liquidity data from stock exchanges commonly includes the size of limit orders for a particular stock on the exchange (i.e., the number of shares to be bought or sold at the specified limit price) and/or the size of completed transactions for the stock. The available liquidity data permits investors to implement volume-based algorithmic trading, such as Volume-Weighted Average Price (VWAP) trading, in which trades for a stock are made over a time horizon in proportion to the volume at which the stock was traded on the exchange over the time horizon. VWAP trading is often considered to, in general, reduce transaction costs by minimizing market impact (the adverse effect of a trader's activities on the price of the stock).
Foreign currency exchange (FX) products, however, are traded in over-the-counter (OTC) markets, so there is no exchange to act as a centralized source for trade volume data for FX products. As a result, VWAP trading for FX products based on the actual trade volume, as implemented for exchange traded assets, is not available. There are some public trading platforms, such as EBS and Reuters, for FX products that publish selective tick data to subscribers. The tick data published to subscribers by such trading platforms includes some of the indicative quotes (e.g., limit orders) for the FX product and some of the completed trade data, but this data does not typically include trade volume data and what information is provided is particular to the specific platform where it is measured and may be partially censored.
It is known to execute time-weighted average pricing for FX, in which a certain amount of a foreign currency is purchased/sold at periodic times interval over a time horizon. It is also known to execute volume-weighted average pricing for FX where volume for the FX product at each time interval in the time horizon is estimated since trade volume data for FX products is not typically published by trading platforms like EBS and Reuters for all currencies.